Is Meta Ahead in AI Race Against Google?

The technological landscape is shifting rapidly as big tech companies race to integrate artificial intelligence (AI) into their business models. At the forefront of this race, Facebook's parent company, Meta Platforms (NASDAQ: META), seems to be gaining an edge, at least from the perspective of some industry analysts, and if the reactions of stock price action is anything to go by.

Meta stock price has added 47% on a YTD basis, as Google shares sit on 35% of gains. Both return levels would have investors happy, but the rate of appreciation in Meta wins this battle, at least over the short term. With markets seemingly keen to reward AI endeavours within this latest growth cycle, considering how well a company is performing in capital markets can be but one way to gain some insight. Meta has a market cap a little over half that of Alphabet, with shifts in $1.29trillion valuation companies statistically easier to achieve than those that are weighted with a $2.3tn cap.

Analysts at Loop Capital have expressed a preference for Meta Platforms over Alphabet (NASDAQ: GOOG), the parent company of Google. He recommends a “buy” rating for Meta stock, while assigning a “neutral hold” rating to Google. The firm bases their optimism for Meta on the company's strategy to develop AI tools geared towards creators and businesses. This approach appears promising due to its potential to foster growth and offer valuable monetisation opportunities.

Meta's CEO Mark Zuckerberg has boldly committed to a significant investment in AI, planning to spend an impressive $40 billion on capital expenditures this year, with a primary focus on artificial intelligence. This allocation represents the largest AI-centric expenditure among the leading technology firms.

Meta’s investment in AI has not been without its critics. Bernstein analysts have likened the division in opinion to the polarised views on Jackson Pollock's art. Detractors of Meta’s AI spending are vocal about their concerns regarding the undefined time horizon and the lack of clarity on commercial products emerging from this investment. Nevertheless, despite these debates, Bernstein has maintained a positive “outperform” rating on Meta stock and reiterated a healthy price target of $575.

Investors seem to be responding well to Meta's strategic moves. Meta stock has seen an uptick in performance, gaining 44% this year and an impressive 77% over the previous 12 months. The stock has reached a 52-week high of $531.49, and it's currently trading slightly below that threshold.

Meta is heavily investing in AI to develop sophisticated tools for content creators and businesses. With the goal of enhancing the user experience, these investments are strategically aimed at boosting monetisation opportunities.

This focus on AI not only positions Meta as a frontrunner in the tech race but also signals potential for substantial long-term growth. As the AI landscape evolves, Meta's substantial investments and strategic focus on empowering creators and businesses may give it an edge over competitors like Google.